Frugal Homeowner®

QUESTION: There’s so much buzz about mortgage fraud in the wake of the mortgage meltdown. But exactly what type of scams do ordinary consumers fall prey to? ----JO
ANSWER: While the type and number of mortgage-related scams have increased, many occur if you’re upside down on a loan, behind on your payments, or facing foreclosure. Not only could cons take your hard-earned money, they just might walk away with your home.

If someone asks for an upfront fee for mortgage assistance, it should signal your scam radar. Fees should never be charged until a service is rendered. And if someone claiming to represent your lender asks you for fees, it’s probably a scam. Your mortgage company will not charge you for counseling regarding your mortgage.

Before working with someone or a company that claims can help you work through your mortgage woes, contact the Better Business Bureau, www.bbb.org to see if others have reported fraudulent activity about them.

Beware of investors who offer to purchase your property, but first require your social security number, bank account or routing numbers. There is absolutely no reason why any investor would ever need that information. Additionally, if you happen to receive a call from your bank, asking you to verify account information, ask for their name and department and tell them you’ll call them back. It could be a set-up to steal your money and your identity.

Be especially wary of "rent to buy" scenarios. The scammer tells the homeowner that if they sign the title over to him, they can remain in the home (which is an overriding desire for most homeowners). The scammer says he’ll get the house refinanced into a lower rate loan with lower monthly payments. The homeowners can pay rent until they get back on their financial feet, and then obtain a home loan to purchase the property back.

It doesn’t take a rocket scientist to see how fraught with pitfalls this scenario could be. Most sellers in trouble don’t run legal papers by an attorney or consult the work-out plan with their lender or financial advisor. And then there are the costly upfront fees or fees wrapped into the “rent to buy” scam, making it financially unfeasible to comply with the terms of the agreement. The end result is that the owner-turned-renter is evicted, losing the home and any possible equity.

The bottom line is never sign anything before having a real estate attorney thoroughly review it. Don't worry about insulting the company or person offering to help you. If they’re truly honest and professional, they’ll understand your need to make sure it’s beneficial to you as well as legitimate.